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Mayor De Blasio Presents Preliminary 2015 NYC Budget

So today I am pleased to share with the people of New York City our preliminary budget for Fiscal Year 2015. This is the first step in a complex and collaborative process. One that – I did the count with Dean the other day – I’ve gone through in one form or another as Public Advocate, City Council Member and mayoral staffer, I think this is the 17th budget I’ve been involved in, in one form or another. So it is a complex and collaborative process. It will lead to our presentation of the Executive Budget this spring – which the City Council will then review, and modify, and approve before July 1st, when our next fiscal year begins.

I want to thank Dean Fuleihan and all the folks at OMB who worked so hard in preparing this preliminary budget, and I’ve had the honor of working with a number of them individually over the last days. I want to thank them for their great efforts. We enter this process with a clear vision of the fiscal challenges ahead, including the structural deficits we face each year and the gap that we forecast for Fiscal 2016. In navigating these budget waters, I’ve directed our Office of Management and Budget to be guided by three core values, the same values that have shaped my thinking as we’ve developed this budget.

The first of these values is fiscal responsibility – a responsibility that we all take very seriously. And being responsible means that we will be efficient and effective in providing services to our fellow New Yorkers. It also means clearly understanding and addressing all of the possible pitfalls in this budget process. And we have an unusual number, an unusual intensity of pitfalls that we are looking at this year. Now, the murky waters have been created in part by the previous administration’s unprecedented failure to resolve 152 collective bargaining agreements with city workers, some of whom have been without contract since 2008, fully six years ago.

The risks continue with the problem of the gridlock with Washington that continues to deepen and poses a huge challenge, not only to our cities, but to our national economy as well. And then of course, there are uncertainties for the city budget in the decisions that have still not been taken in Albany regarding the state budget and its impact on the city. So all of that frames our focus on fiscal responsibility and the fact that it underlies all of our decision-making.

The second value I stress in the process is that the budget must reflect a progressive agenda. It must reflect what New Yorkers need right now, it must reflect the values that this city made clear that they expect us to pursue – and I underscored that in our State of the City speech on Monday. Ours is a progressive administration. Our budget will be a progressive budget, one that puts us on the road to giving hard-working New Yorkers a fair shot.

And I want to make something absolutely clear, because I think that the discourse in this town and probably all over the country in recent years has missed this point: there is nothing mutually exclusive between being both fiscally responsible and economically progressive. Something we have to do in tandem. It may sound counterintuitive to some. But we need a balanced budget and a strong and stable city government to facilitate our fight against inequality. We have to do both at the same time. The reason is, being fiscally responsible is what allows us to be a healthy functioning government that is better positioned to serve people’s needs and build a pathway to greater equality.

We are beginning to implement my progressive agenda for New York City. The preliminary budget, for example, enforces our new paid sick leave law and it creates the pathway to the new NYPD Inspector General – a couple of examples that you’ll see in our budget document.

But the centerpiece of our budget is education – specifically the universal pre-K program, the expanded afterschool, and securing long deferred state education aid. And this we’ll talk about in a moment. This obviously relates to the Campaign for Fiscal Equity and the court decision many years ago.

These educational investments will be transformative for our city. They’ll improve student achievement and boost economic opportunity for New Yorkers in every borough in every neighborhood. And that’s why we must fund universal full-day pre-K and after-school programs for middle school kids with one targeted tax increase – the only targeted tax increase we propose: a small tax on the wealthiest New Yorkers. This is the most fair and reasonable way to ensure this investment is made: by asking the most successful and fortunate among us to chip in a small amount to a dedicated fund that will be used to only pay for these investments, we’re putting our city on a positive, progressive path forward.

Now, the third value in this budget process, on which this preliminary budget rests, is honesty and transparency. We are, for example, going to be upfront about the structural deficit in this budget. The current Fiscal 14 budget and next year’s Fiscal 15 budget were only balanced by rolling over funds from the previous year. There is therefore an obvious structural deficit. For example, it requires $1.8 billion from Fiscal 14 to balance Fiscal 15. And, we have now projected for Fiscal 16 that we are already facing a deficit of $1.1 billion. We intend to be honest about these realities and talk about the measures we have to take to address them, especially in this atmosphere of uncertainty.

We’re also going to begin the process of putting an end to the cynical budget dance, the game of cuts and restorations that has so long marred the city budget process. For example, in this preliminary budget, you’ll see that we’re including the costs for 20 fire companies that had previously been cut from the Fiscal Year 2015 budget. And we’re restoring the budgets for elected officials who are often used as pawns in this dance, including our five borough presidents and the public advocate.

While we will always be blunt about the difficult budget choices we face, we will not shrink from making those choices. Nor will our profound sense of fiscal responsibility prevent us from embracing the progressive reforms that will move New York City forward. So, this is how we will budget from now on in New York City – responsibly, progressively, and honestly. And it’s how we will get our fiscal house in order while we invest in the future of all New Yorkers.

Now, let me go through some of the facts of what we face, starting with a financial overview.

Just again, the budget for the current year – Fiscal 14 – remains balanced and we have a preliminary plan for the balance of next year’s budget – Fiscal 15.

That being said, the Fiscal 14 budget relies on the use of $1 billion in resources from previous years for balance. Our Fiscal 15 plan relies on the use of $1.8 billion from previous years. Without these resources, both years would’ve had a deficit. Let me say that again. Without these resources, both years would’ve had a deficit. And again, we already face a $1.1 billion deficit for Fiscal 16. There remains tremendous uncertainty about the level of state and federal funding that the city can expect going forward. And there are substantial risks to our local economy that will have an impact on our budget.

Let’s go over some of the overall dynamics facing the city right now.

First, the unemployment rate. New York City’s unemployment rate has stayed above the federal rate, above the state rate for much of the last decade. As you see now, we’re still at 8.5 percent unemployment, which is a troublingly high figure compared to 7.4 percent for the country. Now, where we have had employment growth – and we’re very, very happy we have employment growth – we embrace it and it’s a good thing but the problem is clear at the same time.

Look at the two top areas of employment growth – leisure and hospitality and retail trade – and look at the average wage. $37,000 for leisure and hospitality. $36,000 for retain trade. So growing a lot of jobs. Unfortunately, they’re in the lower-paying fields. And these are dollar figures that make it very tough for people to take care of their families. We do see some substantial progress when it comes to the tech sector – and you see that reflected in some of the other growth categories. Those, thank God, are higher paying jobs. And, as you heard in the State of the City address, we intend to a lot to help everyday New Yorkers get access to those better paying jobs in the tech sector.

Now, let’s look – we’ve talked a lot about inequality in the city and in this country – let’s look at the numbers because they’re quite shocking. Income inequality in the United States at levels not seen since the 1920s. You can see this here – the last peaks of this level literally at the dawn of the Great Depression. New York City? An even starker situation. The percentage of income earned by the top one percent of earners in the United States of America around 20 percent. In New York City, in the high 30s – almost twice as much.

Look at some facts related to our housing market – and again, here we see a mix of indicators. Volume has improved but – has begun to recover not the levels we had seen previously, but they’ve certainly begun to recover – but look at what’s going with prices. This is a good thing that there are increased housing sales but the double-edged sword here is look what’s happening to prices and what it’s doing for many working New Yorkers in terms of their ability to access affordable housing. And you can see now, looking at co-ops, high end co-ops have been the hottest part of the market, pushing up the co-op cost. Again, volume has not returned to pre-crisis levels, pre-recession levels, but costs continue to go up. Going ahead to condos, condos have – the prices have nearly recovered from the economic recession. Again, high-end condos being the strongest piece of this market, volume still below peak levels.

It all adds up to some good news for our city, for our economy – of course, higher real estate values come with many great attributes for our city and for the people of our city. But the intense growth at the highest end of the housing market is creating fewer options for everyday New Yorkers. This is why – and you – something we talked about a lot in the State of the City, we’ll talk a lot about in the weeks and months to come – this is why we’re so committed to a very ambitious plan to create and preserve 200,000 units of affordable housing in the next ten years. Again, enough to house between 400,000 and 500,000 New Yorkers.

Some people, as we’ve gone through some of the briefings with elected officials today, have said, where does that show in this preliminary budget? The fact is that the affordable housing plan rests largely on other types of action, like inclusionary – mandatory inclusionary zoning and re-zonings and other types of actions we want to take, actions with our pension funds and certainly our capital budget, which we’ll have a lot more to say about in April.

Now here is a piece of the picture that is truly bright and something we’re going to put a lot of energy into – the technology industry. The tech industry has added 10,000 jobs over the last five years. The average wage has grown nearly 17 percent over the same period. So again, look at these numbers in terms of the kind of salaries. Average wage - $119,000 – was 42 percent higher than the average private sector wage in New York City. So this is a great area of growth for the city. There’s a lot more growth to be had. We had, when it comes to the tech sector, a really fantastic confluence of elements in this city – strong academic institutions, the communications and media industries, all the creative talent in this city, a huge market and a huge presence of all types of corporations from all around the world. This makes us a perfect environment for growth in the tech sector. And we’re going to have a lot to say in the coming weeks about a number of ways we’re going to facilitate the growth of the tech sector. But, again, with a clear understanding – we want to make sure that those jobs are available to every kind of New Yorker. And that’s going to take new investments in training, particularly through CUNY, to make sure we can open up the tech sector to more and more people.

Now let’s talk about where stand in terms of education. There’s a lot you can say about education but I think this next slide really puts a point to it. This is from a New York Times editorial on January 26, showing that, according to the New York State Department of Education, only one in four New York City students – started high school 2009, graduated on time in 2013 – only one in four performed well enough on the Regents exams to meet the state definition of college readiness. If there’s one slide – the one slide alone I could show you – to make the point that we have a mountain to climb when it comes to public education, this is it. We are so far off the mark of where we need to be, particularly in an economy that demands higher levels of education for economic stability and strength for any New Yorker going forward. This is why we’re going to talk about the investments we have to make in education because we are not even close to where we need to be in terms of preparing our young people for their lives and for their economic futures.

I mentioned before, the state of New York over a number of different administrations has not kept up with its obligation to fund New York City schools. The Court of Appeals’ decision in the last decade made abundantly clear the obligation of the state of New York and if you take that formula and you extrapolate it to this year, it would it be $2.7 billion per year owed to the city of New York by the state.

We’re asking the state for additional school aid dollars. And we think that it’s time for a substantial new infusion of school aid dollars for particularly strategic investments that would help us to address the problem. I just raised of our graduation rate and so many of the other challenges we have in our schools.

We want to focus these resources on reducing class size and additional support for teachers in the early grades. Kindergarten, first grade, second grade, third grade – obviously we want to link that up with a strong effort at pre-K and really get our kids on track. It’s well known that if kids are not on track by third grade it’s extremely difficult to get them back to grade level. So we want to put additional focus on that effort.

We also believe that to live up to the standards of the Common Core – standards that I believe in – but I think we have to address seriously, in terms of the kind of effort needed to prepare kids, that we have to do a lot more academic intervention at the elementary school level.

Finally, we need the state’s support to raise the floor – meaning to create true funding equity across each and every school in our city. And just take a look at this next slide of how far off the mark we are on state school aid. Again, this has progressed now over several administrations in Albany. It’s time for us to start to address this and start to get our fair share.

Now let’s talk about our central focus, which – in terms of education – which is pre-K and afterschool. I’d like to start with the facts just so everyone’s clear. This is the current reality in New York City today. Fewer than 20,000 kids get full-day pre-K. About 40,000 kids get half-day. That means something like 8:30 to 11:30, for example. It’s a small amount of time. It’s not enough time to properly educate kids. It certainly doesn’t fit with parental schedules. And there’s about another 10,000 who applied and didn’t get anything at all. So out of a total universe of around 70,000 kids, only 20,000 got full-day pre-K. That’s why we need a dedicated tax. And I emphasize – a tax that will be placed in a lockbox so it would only be used for the purposes of pre-K and afterschool. And we believe that this is such an important challenge to address, we believe that this investment will make such a huge impact on our children that it can’t wait. Every year that we fail to provide full-day pre-K for our children, they are falling behind. It’s as simple as that. So the difference between ramping up this program for this September and waiting another year means yet another generation of kids are not given the support they need to actually get the education required by the modern economy. So we owe it to our children to move this initiative this year. And our white paper published a few weeks ago makes very clear how aggressively we’re ready to do so.

You’ll see in the financial plan, we have added in the $530 million we seek for pre-K and afterschool, clarifying that that means that the income tax rate – the city income tax rate – for earners at $500,000 and above would from 3.9 percent to 4.4 percent. And that means about a half a percent increase for five years.

Let’s look at this. Next slide makes clear just how consistent that is with previous levels of taxation. In fact, for much of the 1990s and 2000s, the tax rate I proposed – 4.41 percent – would’ve been lower than the tax rate for folks in that income bracket. So we are squarely in the mainstream with this proposal. And in terms of breaking out how the tax revenues would be gathered from different sub-brackets – as you can see – over 95 percent of the revenue would be paid by taxpayers with annual incomes greater than $1 million.

Now, I’ve talked a lot about education, but, as you know, I’ve been very focused also on the issue of community healthcare. Our local hospitals have been struggling and we have lost a number of them in recent years. You can see below, all of the hospitals lost during the Bloomberg years. Again, a shocking number. And just for effect, I want you to hear them. These were all closed during the 12 Bloomberg years. Peninsula Hospital Center, St. Vincent’s, Mary Immaculate, St. John’s, Cabrini Medical Center, Parkway Hospital, Victory Memorial Hospital, St. Vincent’s Midtown, St. Joseph’s Hospital, St. Mary’s Brooklyn Hospital, Beth Israel Medical Center Singer Division, Our Lady of Mercy Medical Center, Florence D’Urso Pavilion, Brooklyn Hospital Center Caledonian Division, Interfaith Medical Center Jewish Division, Staten Island University Concord Division, and North General. All were closed in the last 12 years without a true process that involved the community and that brought partnership between city and state to determine strategic outcomes and to protect community healthcare.

Now, right now, listen to the hospitals all experiencing financial duress right now in this city. Interfaith Medical Center, Downstate, Long Island College Hospital, Brookdale, Brooklyn Hospital Center, St. John’s Hospital Center – the only hospital remaining the Rockaways – Wyckoff Medical Center, and Kingsbrook Jewish Medical Center. All in distress. As you know, I’ve been deeply involved on this issue and particularly in the case of Long Island College Hospital and Interfaith. And we are working intensely with the state on plans to provide community healthcare in both locations and to protect, finally, community healthcare against these endless closures. But this has been an epidemic and it needs to be addressed.

Now one of the most profound changes we need rests in Washington. New York State has rightfully request a $10 billion waiver from the federal government – a Medicaid waiver – for restructuring of healthcare facilities that is consistent with the federal vision for where our healthcare needs to go. The state of New York has been absolutely right to do it. Governor Cuomo has been absolutely right to demand this waiver – and it’s long overdue – and I have joined with him and will continue to join with him in demanding that Washington act. We have been waiting for a very long time and I believe, as does the Governor, that this action must be taken in February to allow us to utilize this waiver to the maximum extent possible to protect community healthcare facilities. You’ve heard how many are on the chopping block right now. We need this waiver to protect them, to do the right kind of restructurings to protect community healthcare, and we need it to maintain our own City Health and Hospitals Corporation’s ability to serve all New Yorkers.

Listen to these numbers, as everyone knows – HHC [inaudible] public hospitals provide comprehensive medical, mental health, and substance abuse services, regardless of the ability of the patients to pay. Medicaid clients and the underinsured drive 66 percent of HHC’s discharges and HHC’s shared Medicaid discharges among all New York state public hospitals is over 70 percent. So, we have real intense needs with HHC that this waiver could be a crucial part of addressing, as time for the federal government to help in this effort to secure health care in New York City.

Let’s talk about Sandy. Again, I’d like to remind us, this is one of these days where we get to reflect a little more than maybe some of our typical press conferences. Sandy was the greatest natural disaster ever to hit the city of New York, period. There’s not even any close parallel. 9/11 was our greatest human tragedy on so many levels, but as a matter of natural disaster, nothing came close to Sandy. And the needs that we continue to have are great, as I said on Monday, so many New Yorkers are feeling the effects of Sandy urgently and intensely to this day. So look at the totals here: estimated total needs and resolve unmet needs of almost $8 billion dollars, but the federal government is so far only covering $3.2 billion of these costs. So we have $4.6 billion of unmet needs that have not yet been addressed, and have to be addressed for the future of this city. And, that’s not the only federal uncertainty we face.

In just Fiscal 14, the year we’re in, as you can see from the chart, we’ve sustained close to $150 million in other federal cuts, to education, social services, health, housing, criminal justice. And with other challenges looming in Washington, we are not secure in what’s going to happen going forward. And then our people have faced another challenge because of the federal cuts to food stamps, to the SNAP program. Food stamps totals will be reduced, the food stamp allotment will reduce for literally a million New York City households in need. Let me do that again. Food stamps benefits will be reduced, because of the farm bill that was passed last week - 1 million New York City households will get less support, regardless of the dire circumstances they find themselves in. That is the federal situation we face.

Now, let’s talk about our own dynamics here at home when it comes to labor contracts. You’ve heard me say before it’s unprecedented; we wanted this to be very vivid to you, because to say it’s unprecedented only begins to explain the depths of the problem. Here are the over 150 collective bargaining units that are unsettled. 150 separate unions, all of whom do not have a contract, right now, as we start this new administration. Unprecedented in this city’s history. Let’s look at some of the facts of how previous mayors started their administrations, and this speaks to the level of responsibility of previous administrations in leaving to their successors at least a somewhat resolved picture. Go all the way back to Abe Beame, the last five mayors in a row, each of them came in with substantial labor settlements already resolved and done. This is the first time a mayor has entered office with every single contract open, and it doesn’t mean they just opened. Look at the length of the expiration period on these contracts. Some of these contracts go back as far as 2008. Six years without a settled contract. Some go back to 2009, including some of our largest unions. Some go back to 2010. So it’s both the sheer number of open contracts, absolutely in and of itself unprecedented, and the reality that these contracts have been unresolved for years and years.

Finally, just to add to the mix, something we know we can’t control: the weather. People have asked over the last few days what the budget impact was, and we’ve finally gotten the full picture, and because of the last few storms and the one we know is coming now, we have decided to add substantial additional resources for Fiscal 14 to the Sanitation Department to handle the storms and all of the impacts related to storms including the trash pickups that have to be caught up on, et cetera. So we’ve increased for Fiscal 14 the allocation to the sanitation department by $35 million.

Now, that being said, as I promised in the beginning, we are very sober about these challenges, we are looking them in the eye, we’re taking steps to address each and every one. And that does not, in any way, dissuade us from focusing on our progressive agenda. We know we have to do both at once. So in addition to our central focus on pre-K and afterschool, our 2015 preliminary budget begins to fund a number of other priorities as well. Resources are in this budget to implement and enforce our new paid sick leave law, both the previous law, which takes effect in April, and the additional legislation that we’ve proposed and expect to pass, that will reach 500,000 more New Yorkers.

Working with the governor, I’m proud to say we’re taking a big step forward to cap the rent contribution for HIV and AIDS clients of supported housing, folks with HIV and AIDS, who are struggling as it is and need some stability in their lives. I’ve believed in this 30 percent rent cap for a long time. The city will pay approximately two-thirds of this cost, something Mayor Bloomberg was unwilling to do, but I think is necessary. And Governor Cuomo and I have discussed this matter, and we’re working on a final agreement for the state to join us in this effort.

We’re also working with Governor Cuomo to develop a pilot program for homelessness prevention, to put New York City back into the business of stopping homelessness before it starts. As many of you know, Governor Cuomo and I first worked together in 1995, when he was the Assistant Secretary of HUD, and one of the areas he focused on all over the country was homelessness. He has a very powerful history, an important history, on this topic. We are going to work together to undo the mistakes of the previous administration. I think the cancellation of homelessness prevention programs is one of the reasons why we literally have the all-time highest number of New Yorkers in shelter at this very moment. We’re increasing funding in both Fiscal 14 and Fiscal 15 for runaway and homeless youth programs. This is one of the most profound challenges we face: young people who run away from home and end up homeless, and they deserve our support on a greater level.

We have added resources to start our new municipal ID program for all city residents. We’re eliminating cuts imposed by the last administration that we simply don’t agree with, and don’t reflect our values, that’s a total of $93 million for Fiscal 14, $72 million for Fiscal 15. And we’ve added the resources to create an independent NYPD inspector general.

Now, very important, and something long overdue: for Fiscal 14, we’re beginning with this first step. For Fiscal 14, the year we’re in, in which NYCHA had been required by the previous administration to pay, as has been the case in recent years, to pay for police services, we have cancelled the remaining $52 million in payments. So NYCHA will not be required, for the remainder of this fiscal year, to pay the $52 million it would have been required to pay for policing services. That money can be utilized to allow NYCHA to address crucial, crucial needs­ – most especially, the huge repair backlog that many of us have spoken out on for years. With these resources, we will reduce the outstanding work orders by 33 percent, we will increase response time for basic maintenance and for skilled-trade orders, and we’ll create an independent inspection unit to make sure these repairs are done properly. It’s a crucial step forward for NYCHA. We will of course compensate the NYPD in this fiscal year so they will remain whole in their budget.

And in the vein of addressing some fundamental fiscal realities, we are reversing decisions of the previous administration, in which some of the tools we have that protect our fiscal health that were underutilized, in fact were drawn down – we believe – inappropriately. So, we are adding $1 billion to the Retiree Health Benefits Trust Fund, to make sure that that fund will be stronger going forward. Finally, as I said in the beginning, we are taking the first steps of a multi-step process to end the budget dance. We would like budgeting to be honest, we’d like it to be transparent, so we’d not like to waste the time of hardworking New Yorkers on the Kabuki theater that made up the budget dance. So we restored the funding for the fire companies. Remember, each and every year over the last five years, cuts were put in the budget; they miraculously were restored at the end of the process. What is it — fool me once, shame on you, fool me twice, shame on me. So we got the point that that was a game. We’re not playing that game anymore. So the money for the fire companies is back in the preliminary budget, as well as the funding for the borough presidents and for the public advocate. With that, and in case that hasn’t exhausted you enough, let’s bring up Dean Fuleihan for more.

Budget Director Dean Fuleihan: Thank you, Mr. Mayor. The mayor has given really a lot of detail and depth on what his instructions were to me, to all the senior staff, and to the staff at OMB, on how we were to approach this budget, and those core values that the mayor spoke about. I’m just going to quickly go over a few additional pieces that are part of the framework, the backdrop of this budget.

It starts, obviously, with the economy and the U.S. economy. The mayor has repeatedly – both in the State of the City, prior to that, and today – talked about the numerous risks that we face and that we confront. At the same time though, we are fortunate that at least there is modest national economic growth. It is not consistent across all sectors. The mayor actually talked about the difference in sectors and the greatest growth, and those were the lowest paying jobs. But it is growth, and that growth reflects itself in our financial plan. The gross city product, which we put out and you can see – and remember that line is where – 2013 and then 2014. It shows, again, growth. And it shows that the city is recovering, but once again, these are modest recoveries, and we’re only now beginning to get back to ’07 levels. And that’s an important piece to remember. It’s important to remember really – it’s a great deal of lost economic activity, lost resources, lost employment. So there’s a great deal behind that slide.

The mayor went over a great deal of what’s happening in real estate. He talked about the housing values, condos, co-ops, what’s happening that it is not returning – or it’s very struggling to return to pre-recession levels – but that the prices at the very high end have increased. You do see that we’re doing better on a national scale than the rest of the nation. Although, these vacancy rates are starting to increase. The mayor did the housing sale value we just talked about, so I’ll move beyond that. Construction is just another aspect of what happens in that real estate industry. And we’re not – we’re really not even close to what we experienced a decade before. And that is a lot of very good jobs that have been lost.

It is recovering, the mayor talked about unemployment, so I’m going to move now to some of the budget slides. The revenue pitcher for the City – these are changes from the November plan. So from the changes from the November plan we are seeing some increases in 2014, if you look in the first column, in the property tax – which you expected from what happened a month ago when the preliminary assessment came out – to the personal income tax, has shown some additional growth. And there have been the $310 million in transaction taxes are some significant one-time transactions that have occurred. And that has allowed this revenue increase and that total revenue increase over the November plan is $890 million. That is still fairly modest growth on a year to year basis, but it is $890 million that we have recognized in this budget. In the next year, we’re at $494. The bottom line number is worth mentioning because we include in this budget the $530 million from the personal income tax, dedicated personal income tax, lockbox surcharge that will go to finance the five years of universal full-day pre-K and the middle school afterschool extended day programs. And that’s included, so when you look at the revenue numbers, that’s been added to it, but it is that dedicated portion of it.

The initiatives that the mayor spoke about, and so we do have, very directed, very focused initiatives consistent with the agenda that the mayor has been putting forward, the Department of Investigations, the rent cap – the housing rent cap is actually the 30 percent cap on HIV and AIDS population – municipal IDs. These are modest sums to get these things up and running and going: the directive to deal with the Auburn and Catherine Street shelters, which is a this-year cost, the youth and community services that the mayor also spoke about, implement consumer affairs – on the implementation and enforcement of paid sick leave.

On the next slide, there are – two really – components to this: the reform of the budget process, the reversal or some of the prior administrative actions, the cancellation of the 20 fire companies. That annual dance that happened here has ended for 2015 for the out year. Social services is actually different. It was one of the prior administration’s cuts, one of their pegs. We’re simply moving it to the following year because basically it was closing very needed community centers, the buildings that the city owned. Instead, the mayor has instructed us to take a year and find those savings, but find an efficient way to still provide the same community services. The restoration of the election officials, the mayor also pointed out, and that’s consistent with what happens every year in that process. NYCHA, the mayor spoke about, and there’s no need to emphasize that more. It’s a major initiative. And then there are a few other points where actions by the prior administration, by the Bloomberg administration, are not consistent with what we’re trying to do – homeless being a key one where the mayor and the governor are working together to try to develop a homeless prevention program. As it is a change in the November plan, and obviously it’s a process, and that change will continue again in the presentation of the Executive Budget in April.

There are technical changes in here. So what you see here – technical, well the staff calls it technical, I don’t know if the snow is technical, but it’s for the operations of the government. The Board of Elections has a federal mandate to allow our foreign-service military to be able to vote, so that’s an additional primary that wasn’t there before. And so these are prior expenses that were really already in place, including in the Department of Law.

The other piece, the other major expense changes: debt service. There are debt service savings in the budget, $277 million in the current fiscal year 2014, $87 million in 2015. It’s due primarily to refinance savings, there are also some interest rate adjustments. The next piece is the general reserve, so for the current year the general reserves started the year at $450 million. In the November financial plan, it was reduced to $150 million. We are maintaining that, and in the next fiscal year we are starting – we are adding $300 million from what the November plan had, and that gives us a general reserve of $600 million. And then finally, to reverse the Bloomberg decision to take money out of the retiree health benefit trust fund, and to maintain that billion dollars in the trust fund, recognizing that serious and long-term and growing liability.

The tables – I’m not going to spend a lot of time on the tables. It’s worth – let’s focus on this one and we’re happy after that to talk about questions. I’ll go through these very quickly. This does show, actually, very much what the mayor described. There were deficits in both 2014 and 2015 that were addressed by prior year funds. Over a billion dollars in 2014, nearly $1.8 billion – I’m sorry – over a billion dollars in 2014, $1.8 billion in 2015, still leaving us with over a billion dollar deficit – forecasted deficit – in 2016. So that really does show a balance in both years without accounting for the risks that the mayor detailed. And those risks were many, and those risks are from contracts, to federal, to state, to lack of Sandy commitment – there is a whole pile of them that are not included while we still present two years of a balanced budget.

The other slides, once again, talks about what we actually can control in the budget, and you can see that it’s a modest, and responsible, and targeted increase that we’ve done in this preliminary budget. Most of the expenses obviously have been fixed by the prior administration or are mandated on us, and with that, I’m actually going to – if there are any questions on these, we’re happy to answer them, but I’m going to turn it back to the mayor.

Mayor: So, it was a pleasure for Tony and I to see Dean Fuleihan on his maiden voyage as Budget Director. Well done, Dean. And this is not Tony Shorris’s maiden voyage with a city budget, sorry. Been there a few times, haven’t you Tony? So we are looking forward to a number of questions. Again, today we’re going to stay on the topic of the budget only. Tomorrow, we will talk about anything and everything, starting with snow. But on this topic, Juan Manuel?

Question: Mr. Mayor, do you perceive, once you settle the contracts for the municipal unions, any kind of tax increase, and do you have any money allocated to the possibility of retroactive pay once you settle the contracts?

Mayor: I’m going to start, and I’m going to invite, throughout this process, Dean and Tony both to jump in and add anything. On the question of how we’re going to navigate this whole thing — we’ve said throughout this process that we’re in the great unknown here. We’ve never had this many open contracts. The very process of negotiating is difficult and complex and time-consuming. We’ve just begun that process. We are adamant that we want to get as far as we can in that process in 2014, but it’s so unpredictable we can’t tell you exactly what the schedule will be. We do know we’re going to need cost-savings and efficiencies to get through this, and we’ve said that very honestly throughout this process. So the focus now is on moving the negotiations forward in a very productive way, a very private way, and a very respectful way, which I don’t think was done in the past, and I think that’s part of the reason why there wasn’t progress. We don’t get into the specific numbers because the demands of the negotiation process require discretion. But there are no planned tax increases. The only tax increase that I put on the table is for pre-K and afterschool.

Question: So basically, you’re allocating some money for maybe those contracts, and the retroactive pay, but you’re not telling us today where the money is.

Mayor: I like your creative reinterpretation, but it’s not accurate. But your flight of fancy is impressive. We’ve put forward a budget. It’s pretty straightforward what we’ve done here. We’ve said that to get to a resolution on these negotiations, we’re going to need to find substantial cost-savings. So that will be the x-factor you can’t see, because it hasn’t been negotiated yet. Anything you want to add?

Budget Director Fuleihan: In the November plan, there was about $500 million dollars that had been put aside in a labor reserve for ’14 and ’15, and that’s still there, that was not changed from the November plan.

Question: Mayor, I noticed a decline in the miscellaneous revenues. Does that reflect your pledge to not keep fining the hell out of the outer-boroughs?

Mayor: First of all, I commend you for immediately looking to “miscellaneous revenues,” that’s an impressive personality trait. We’ve made very clear to all of the pertinent agencies that we are not trying to artificially bring in revenue on the backs of hardworking people, and hardworking small business people in particular. I think the miscellaneous category has a lot of different things in it, but I do want to affirm that we’ve sent that message clearly to our agencies, we’ve sent that message clearly to people that we’re bringing in to lead those agencies, and there’s going to be a process of change. But the thing that we’re focused on immediately is ending the arbitrary ticket blitzes that were revenue-focused. And I think it’s – again, you saw the reports I put out as public advocate – it’s abundantly clear that was a systematic effort to –

Question: Does it reflect –

Mayor: I don’t mis-state because the miscellaneous category involves a lot of things. I’m saying that the policy of this administration is we’re going to progressively move away from the previous effort at gaining revenue arbitrarily and inappropriately from small businesses. The miscellaneous, I’m sure, has all sorts of fun-filled things –

Budget Director Fuleihan: [inaudible] that are moving up and down, I’d be happy to sit down with you on what up and down, but primarily that is a forecast.

Question: I know you said that you’re not going to negotiate, so that’s really not worth asking –

Mayor: What, now you’re going to ask me to negotiate?

Question: With the billion dollars back in the trust fund, with the extra $300 million in the general reserve, this gives you extra money you didn’t think you had in November. Is that money that could conceivably go toward contracts?

Mayor: It’s money that should have been there already, as a matter of fiscal prudence. So, I’ll start – again, Dean or Tony, jump in. You know, I have to say this, and this will probably grate to some people’s ears, because I think the previous administration was given an artificially high level of credit for management, and in some areas I would be the first to say they did some great things, and some of which I agree with, and some of which I’ll continue. But the way they budgeted was not appropriate. You cannot ignore open labor contracts for years on end. Part of why we showed you that slide about the other five mayors, who were about as disparate a group of human beings as you could possibly put in one room together, but they all shared something in common: they did not leave to their successors entirely open labor contracts across the board. And I think it’s also true that in some of the reserve areas, there was a spending down, and I have not made a secret of the fact, that in the final year or two of the Bloomberg Administration, there was a particular interest in burnishing the mayor’s legacy. And I don’t think those reserves should have been tampered with. So we are restoring reserves that we think are necessary.

Question: That is money that could go toward the contracts, I mean, the general reserve was never [inaudible] double what it always was.

Mayor: It’s the money we think is necessary –

Budget Director Fuleihan: No, the general reserve in last year’s budget was $450 million. This is $600. I’m just correcting the number.

Question: I noticed you are including in your budget the $530 million for universal pre-K. I wonder what – I know you don’t like to bet against yourself, but what happens if you don’t get it, given the fact that Governor Cuomo today said that asking for a tax on the rich is, and I quote him, “repugnant to the whole equity argument” and that poor districts would be hurt because they can’t afford the tax on the rich. [inaudible]

Mayor: I appreciate that you know I don’t like to bargain against myself, and I appreciate your question inviting me to bargain against myself. So I will not take that particular bait. I will say this: we believe this is the right way to do this, and I think — you know, what’s very interesting in this whole dialogue, statewide, is the question is how do you actually cross the Rubicon here when it comes to pre-K and afterschool. The state of Oklahoma is doing it. You know, people all over the country are calling for it. How do you actually do it? And what we’ve said is, that this is the amount of money it’s going to take to really mount consistently in New York City.

We’ve done the white paper to show how it would be done. We have a single individual who would be in charge of implementation – he’s sitting right there, Deputy Mayor-to-be Richard Buery. And all of the key commissioners and agencies are on board. So we’re on the runway ready to take off right now, the engines are revving and we’re ready to go. If there’s going to be a discussion about pre-K, and the future of pre-K, and the future of afterschool, it has to come with real facts and figures and numbers and a plan. And we’ve presented a plan, and that’s the only plan on the table right now that would actually achieve this. So we’re fundamentally convinced that this is the right way forward. By the way, you see a growing number of wealthy New Yorkers embracing this plan, and business folks embracing this plan, because they realize it’s practical, and it’s what we need for our future. As for the question of equity, I’m someone who, as you know, has spent a lot of time around the state of New York. And I care deeply for our fellow citizens all over the state, and I think they’re facing tremendous challenges too, and I think we want everyone to move forward, but we’re in a position to get this done here and now, with our resources. And by the way, the children we would reach are amongst the poorest in the United States of America. Let’s be clear. There are serious problems upstate, serious economic problems, but the kids in our system, who are amongst the poorest in the country, who deal with some of the greatest challenges in the country, including our large number of special-ed kids and English-language learners, and three quarters of our kids not graduating college-ready. We have vast needs here that must be addressed. If we don’t address them, it holds back the city of New York; it holds back the state of New York. So we’re convinced this is the way forward.

Question: [inaudible] Albany [inaudible]

Mayor: I think we’re getting our point across, and we will continue to. Grace.

Question: On the pre-K question, sort of a core argument that you’ve been making is that there’s overwhelming public support for your plan, and that’s why all the lawmakers should put this tax hike forward for a vote. This morning there was a Quinnipiac University poll that showed more New York City voters like Governor Cuomo’s plan instead of yours. Given that recent poll, does that make your case that much more difficult, and undercut the argument –

Mayor: Not at all. Let me offer why I believe there’s overwhelming support. First of all, we had an election in New York City, in which this was the centerpiece item of my platform. The results are well-documented. Second, we’ve seen a number of public opinion polls that show tremendous support in this city for this plan, and statewide for the plan. With all due respect to the Quinnipiac poll, the way they phrased this question was the equivalent of asking “Would you like a bowl of free candy?” To which most people would say, “yes.” And so the question was phrased, “Would you like all of this to happen without an increase in taxes?” Well, anyone in their right mind would say, “In a perfect world, yes.” But the fact is, you have to pay for it. And we’ve been honest, and again, this is a theme I will come back to throughout this budget process. It’s time for progressives to be fiscally responsible, and dispel any misimpression that a progressive agenda doesn’t go along with fiscal responsibility. So, from the beginning, when I announced this concept 16 months ago, I said, this only happens if it comes with a dedicated funding stream, a sustained funding stream over five years, and the only way you’re going to get that is with a new tax. Let’s not kid ourselves. And some people, during the election process, said, oh, we can find the money here or there. That just was never true. And so we need to move forward with a dedicated tax to make this actually work. If you believe, as I do, this has to work and it has to work now – it’s not something you can put off – it has to have a dedicated funding stream. Yes, Melissa.

Question: Mr. Mayor, you’re increasing spending in a few key areas that are important to you: homelessness, the additional funding for the NYPD to compensate for the NYCHA rent. I’m just wondering where in those major areas is the money coming from? Is it from last year’s surplus, or is there any area in this budget where you’re actually reducing spending so that you can move that money into those priorities?

Mayor: Again, we’ve kept the choices to a few distinct areas, and we’ve kept the choices quite modest. And we’re dealing with a tremendous amount of uncertainty, and I’ll let Dean jump in to explain the intricacies, but I think the simplest way to say it is, we’ve got these three big unknowns – federal budget, state budget, and labor contracts – and associated things like the Sandy costs, and we’re being very cautious in the preliminary budget. We will have some greater information by the time we get to April. In principle, we’ll know what’s going on with the state budget, we’ll know something about what’s going on with labor negotiations. But we were very, very cautious and that’s why you see relatively few new spending initiatives. Anything to add?

Budget Director Fuleihan: No, I mean, that’s actually perfectly said. It is very focused. It is very targeted towards the agenda. And it is focused even by fiscal year. And if you walk through the presentation – both the Mayor did and I did – it was clear that some things were in 2014, and they may be revisited, but that was because that’s how we got to a balanced budget in both years.

Question: Just want to follow up on the last part of my question, is there any area in this budget proposal where you’re reducing spending?

Budget Fuleihan: There are no new broad-based cuts. If there’s anything that declined slightly –I want to be very careful, it’s a big budget and there’s $75 billion in there, so I don’t want to give an absolute statement about everything, so I’ll come back on that, but there is no new broad-based cuts that are happening in this preliminary budget.

Question: One, Mayor Bloomberg said repeatedly that the city doesn’t have enough money for retroactive raises. After your analysis of the budget, do you agree or disagree with that statement? And two, in terms of the employees, the workforce, are the number of employees going to remain constant, [inaudible] layoffs [inaudible]?

Mayor: It’s broadly constant. The big issue on the table is the pre-K and afterschool plan. On the pre-K side, it would involve some additional city employees, but not on the afterschool side. The previous mayors’ statements ring hollow in that there was not an honest effort to find the kind of cost-savings that could have led to resolution of these outstanding contracts. Now, let me be fair. I really try hard to strike a balance. Throughout the last year, I’ve said there are some areas where I agreed deeply with Mayor Bloomberg, where I supported him, issue by issue, and some areas of his agenda that I’m going to carry over into mine – public health, and resiliency, and environment.And I have to say, in his early efforts, in the first term, with labor, there was a clear propensity to find productive outcomes, major cost-savings, substantial reform – while working productively with the unions in a respectful manner. That was actually quite impressive in the first term. And then that dissipated intensely, and as I referenced in my State of the City speech, I sat there at a previous State of the City speech, hearing a part of our workforce attacked from that podium, and found that to be extraordinary in an environment where we’re trying to foster mutual respect and a pathway to resolution of the contracts. So, I think the bottom line is that his concern would ring truer had he attempted actual negotiation for actual reform and cost-savings, to get to actual contract resolutions. None of that happened. We are left with that burden. We’re ready to pick it up. We’re ready to deal with it. And we are clear that the only way that gets dealt with is in a very respectful and positive manner, but we’re also clear that we’re going to have to find some cost-savings to make this work.

Question: But to be clear you do believe that there is money for retroactive raises and that is on the table?

Mayor: Cost savings – I think I’ve learned this much from Dean Fuleihan – correct me if I’m wrong here, Dean – when you save money, you make money – eh? So, you would have to save money to be able to do a lot of different things. I’m not – again, I respect your job is to ask us tough questions – my job is not to infect the negotiation process. So if you find cost savings, there’s lots of creative, interesting things you can do in this world, on any part of this process. But I’m not going to answer any specific question about will we do this if we got that and all – that’s what the negotiation process is for.

Question: So you’re both into retroactive raises?

Mayor: It’s exactly what I’ve said throughout the last year. I’ve said we won’t take anything off the table. Again, let me put this in a context strategically – when you tell people we’re not going to talk about that, it doesn’t tend to make for a good and respectful relationship. When you say, you have that set of needs, I have this set of needs, we’re only going to talk about my needs, that doesn’t work. And so we are trying to create an atmosphere of partnership with municipal labor that says, hey, we’re all in this together, we have substantial challenges we have to face together, we want to do it productively, we want to find solutions that we can work on together and feel good about together. And I think if we stay with that attitude, we’re actually going to get there.

Question: Today, you criticized the Bloomberg administration for drawing down the healthcare – the retiree benefits trust fund. I think that in 2008 when the city was running a surplus the Bloomberg administration decided to make some cuts and put money into that trust fund, you were actually critical of them for not spending more money at the time. How do you square those two things?

Mayor: I don’t know the specifics of what I said in 2008. I’d be happy to respond to it if I can see what the specifics are. I think the bottom line is now, at the end of five years or more of a very troubled economy and with these kind of extraordinary, unforeseen circumstances – you know, in 2008 we didn’t have 150 open labor contracts, in 2008 Sandy hadn’t happened – a lot of things were different then. But now there’s no question in my mind, we have to take a very responsible and careful path. Dave.

Question: Mayor, I know it’s a [inaudible] part of the question, but it’s important to a lot of people. [inaudible] coming tomorrow but the $35 million that you mentioned [inaudible] increase for sanitation. And you may have mentioned this, but is that just for salt? Is it for overtime? Is it for all of the above? And are you going to be doing the same thing for pothole repair with DOT’s budget because they’re –

Mayor: So glad you mentioned pothole repair. Dave, I’m ready. First, I’d like to say that I want to commend Deputy Mayor for Snow Removal Tony Shorris for his extraordinary efforts and his team’s extraordinary efforts. I want to thank John Doherty and the Sanitation Department and all the agencies involved because it’s been an amazing, amazing effort. Now, that $3 million is because we already have seen such extraordinary levels of snow – you’ve seen the comparisons to previous years – and I hate to tell us all this but it’s only February 12 – am I right? You know, we’ve got – depending on which groundhog you talk to – we’ve got another five or six weeks of winter and snow and we needed to put in additional resources to make sure we could handle the snow and that we could handle also the resultant backlogs created in terms of trash pickup and recycling. Again, today, the salt situation is strong. We’ve done some good work. I commend all of the folks in my administration who have, you know, made sure the supplies are there but we looked carefully at the costs so far and what we thought would be needed for the rest of the winter and we came up with that $35M number. On the question of potholes, so Polly Trottenberg and her team have really hit the ground running at DOT so in this last six weeks they have filled 83,000 potholes including 7,000 over this last weekend. So they’ve really – I was going to say hit the ground running, is that a pun? – they’ve really – they’ve hit the streets; they’ve really gone out there very aggressively because these snow conditions have exacerbated the potholes. There’s been an extraordinary effort by DOT to address it quickly.

Question: [inaudible] increase their budget?

Mayor: At this moment, the answer is no, not in this preliminary plan. But we will – that’s what the executive budget is for. If we see changes, we may have to address them then.

Question: You call this a fiscally responsible budget yet the IBO has said that settling the contracts could cost more than $6 billion. There’s nothing in the preliminary budget that I can see that puts any money towards that. So how can you call it fiscally responsible?

Mayor: You know, I’ll start and I imagine Dean has something to say as well. One of the things I’ve learned –I’m not the budget expert that Dean is but – you – everyone has different budget estimates. We respect the IBO immensely. I’ve worked with them for many years. We happen to disagree with their projections to begin with. But we think they’re too rosy in some ways in terms of what they think the city revenue will be, but we’ve said clearly that the only way to address the open labor contracts is with negotiation. We’re not going to undermine that negotiation in any way. And that negotiation has to involve both mutual respect and a mutual understanding of our financial position and a willingness to talk about serious cost savings. So, you can’t project that budgetarily before you’ve had the negotiation. You have to have the negotiation. What we try to do is put the city on a firm footing for any eventuality.

Budget Director Fuleihan: So, the – we do project more revenue. As a matter of fact, in the current year more revenue than the IBO had in their November projection. Not so for the out years. They have a much, much greater growth in personal income nationally and in New York City than any of the consensus forecasters. We hope that’s true but that’s not what we’re forecasting. We’re much more of a consensus-based forecast and, really, over the past five years they’ve had that same, that same hope and that same projection. So, I would just add that. On the overall picture, I think the mayor addressed it.

Mayor: Yes.

Question: Mayor, you added more money for homeless services. Can you talk a little bit more specifically about what they will pay for? You talked about two shelters specifically.

Mayor: Well, there’s two areas, really. There’s the one that’s added here in the preliminary and the area we hope to move into shortly in terms of prevention. On the homeless and runaway youth, the fact is this is a growing problem that has only been partially addressed by the city. And it is a particularly thorny problem because in many cases this is kids – when we say runaway, sometimes it’s runaway, sometimes it’s forced out of their homes in many cases because the kids happen to be LGBT or transgender. The fact is that we need specific programming for them and in some cases we need specific shelter capacity, so this is another step toward that, because these kids often have to be given particular circumstances where they’ll be safe. So this is a commitment I made last year, that we’re going to steadily increase the amount we’re devoting to this area. There’s some commitment in ’14 and additional commitment in ’15. On the question of homelessness prevention, as I said, we’re very pleased to say there’s been real progress with Albany in the last few days on the beginning of a new homelessness prevention program. The governor and I will have a lot more to say about that as we develop it, but there’s no question that we have to get back into homelessness prevention efforts at the absence of things like rental subsidies and anti-eviction legal services have been a major contributing factor to the growth of the shelter population of the city, so we have to reverse it.